Julius Oni is a surgeon who specializes in hip and knee replacements. After learning how to invest in multifamily with his own funds he decided he did not want to hide a great opportunity so he began his life purpose and educated others how to improve their financial wealth.

Now he gets to help more people than ever by educating them on how to do the same. And as an added bonus, he gets to continue doing what he loves – caring – caring for his patients and now caring for his investors! Listen and learn!

Table of Contents:

• Where To Listen To The Podcast
• Julius Oni’s Life Purpose
• The Risk of Not Putting Your Money to Work
• Don’t Hide a Great Opportunity
• The Returns in Multifamily Investing
• The Biggest Risk in Multifamily Investing
• The People You Need for Your Life Purpose
• How to Reach Julius Oni

Julius Oni’s Life Purpose

Darin: A little background on Julius Oni before we start the show. Julius is an orthopedic surgeon specializing in hip and knee replacements. He was looking to grow his family's wealth, and first started to invest in single family, and then into multifamily. When he found the wealth-building opportunities that multifamily provided, he decided he could not hide this opportunity. He had a duty to educate others how to do it. That is one of his key performance indicators. How many people have they educated?

So just a little bit on how we know each other. We both were speakers at a multifamily conference in Charlotte, MFINCON put on by Dan Handford. We were just at one of the after-hours events and then got to know each other. I'm like, "Look man, you're doing some great stuff, let's have you come on the show," and so here we are. So with that, typically first question, how many properties and how many units are you invested in?

Julius: So yes, I'm invested in 694 units currently, and five properties.

Darin: Fantastic. You are a doctor, so help the listeners understand a few things. One, the medical practice is a wide practice, where do you focus? And then two, why did you get involved in real estate?

A Life Purpose for the Progenies

Julius: So I'm an orthopedic surgeon by trade, that's what I've done for the past 10 years. Specifically I replace people's hips and knees, so I'm what is considered a joint replacement doctor. And for me, I love what I do, I enjoy it immensely, and being in the operating room, it's actually my happy place.

Darin: That's awesome.

Julius: Yes, but at the same time I quickly realized at some point that I'm still a highly paid skill worker, even as an orthopedic surgeon. Even though I thoroughly enjoy what I did, I wanted the opportunity to be able to just do it purely for the passion, not necessarily because it pays my bills.

Also, I wanted to start investing in things that I can actually pass on to my progenies, like assets. So I wanted to start investing in things that can create legacy wealth. So it didn't really take long before I quickly realized that multifamily real estate was going to be that asset class for me.

For some people it's stocks, for some people it's other asset classes. But for me, multifamily real estate in particular makes sense. It's tangible and we can talk about all the different advantages of it, including the tax advantages, and everything that multifamily real estate brings to bear. But it was a very easy decision to start investing in multifamily.

Darin: How long ago did you start investing?

Julius: So in multifamily, 2020, but in single family real estate 2015. So I started actually with single family real estate. I initially thought I was going to buy one single family property for the next 30 years. Then at the end of 30 years have a portfolio of about 30 properties that I've organically appreciated significantly.

Single Family Versus Multifamily

Julius: Then maybe I'll sell them as a portfolio, and that was the initial plan.

But I quickly realized that I was not a good landlord. I certainly did not enjoy the process of dealing with tenants, termites, and toilets. And then I tried to outsource that process and quickly realized that it still wasn't working out. The cash flow, one, wasn't impressive. Second, everything cost so much. Changing the doorknob was 50 bucks, changing the light bulb was 60 bucks. I was like, how is this so expensive? But I guess that's the price to pay for outsourcing those types of things.

But most importantly, the cash flow was not what I expected. When I started to learn about multifamily I realized that you know what, when I add vacancies in those single family properties. I mean, I had 100% vacancy. That's it. I mean, I was on the hook for the mortgage.

Darin: You go from 100% to 0% occupancy.

Julius: Exactly, the occupancy was like 0% at that point. And so it quickly made sense to me that if I wanted to be smart about this I needed to scale a lot faster. And what better way to scale but by just buying a multifamily property. That's how our company XSite Capital was born.

Darin: That's awesome. And you mentioned tenants, toilets, and termites, and for people listening that maybe they are in single family, or they haven't gotten involved in real estate investing yet at all, that's one of the things that scares off a lot of people, it’s having to deal with that. And when you go to multifamily, if you buy in large enough properties, you actually have onsite management.

The Life Purpose of Focusing on One Thing

Julius: Absolutely.

Darin: They're leasing out the property, if there's a issue with maintenance, there's a maintenance person on staff. So you don't have to deal with it. It takes away those headaches.

Julius: That's the beauty of it, the property makes enough revenues to pay for the people that are going to take care of it. That's the beauty of it, and more.

Darin: So I've had a few doctors on the show prior and I want to get your take. Because the consistent theme that I've heard from people that are involved is that in the medical space, doctors, they spend quite a bit of time honing their craft and learning their craft and educating themselves on the medical profession. Even though they are highly paid, they don't necessarily want to spend the time understanding how to grow their assets, how to grow their wealth. Do you find the same situation?

Julius: No, there's no questions about that. I think we are trained to be great at focusing on just one thing. And just to completely narrow our focus, become a cardiologist, become an interventional cardiologist, no, become a structural interventional cardiologist. Not just become an orthopedic surgeon, but become a joint replacement surgeon. Not just become orthopedic surgeon, but become a foot and ankle surgeon, and that's all you do.

We are trained to be subspecialized, to hone that craft, become a master at one thing, and literally outsource everything other thing. And we take that same approach with our finances, for the most part. We are trained to essentially max out the 401k, which is great.

Doctors Are Trained to Max Out Their 401K

Julius: And maybe put some money away in some brokerage account, which is great. But when it comes to other active investment strategies, or even passive investment strategies that just require a little bit of active work upfront, maybe to vet the sponsor. We don't want to do any of that.

The reality is we don't get much financial education throughout our curriculums. Either in medical school or in residency, while coming up the educational track. So for those of us that have broken out of the mold and see things slightly differently, you have to educate yourself. You have to actively decide that you know what, I'm going to figure out ways to grow my wealth in a more accelerated fashion instead of just what we get with trading our hours for dollars.

Darin: That's huge. And there could be different levels to that. I mean, there's certain people that I've met that have made the transition. They decided, hey, I'm going to allocate some capital to real estate, build legacy wealth, like you mentioned. I want to get on the active side and be involved in deals. Also bring other people into deals and educate other people. But then there's the other side of it where there's a lot of highly paid people, whether they're doctors, or sales reps in software companies, or whatever the case may be, athletes, and they can take some of that money and they don't have to put it all with a financial advisor in the stock market. They can diversify and be passive. So can you explain how that works?

Julius: Even worse, some of them don't even put it with a financial advisor in the stock market, they put in a savings account.

The Risk of Not Putting Your Money to Work

Darin: What's the return on a savings account?

Julius: If you’re very nice to them, maybe 0.09%, maybe 1%. But guess what? The moment you drop that money with the bank and deposit it in the bank account, it becomes a liability to the bank and they put it to work for you. Not for you, for themselves.

Because really they put that money to work, they're getting 3%, 4%, 20%, 40% on it. And they're giving you just a tiny little bit of a percentage on it. Even worse, if you have it in a checking account you're getting nothing on it at all. Actually, it's losing value with inflation, particularly with inflation being in 5, 6, 7, 8% nowadays.

I mean, besides your emergency funds, and maybe some extra fund depending on who you are, whatever makes you feel comfortable to have in the bank, you should be putting that money to work so that it's growing for you. The risk is actually sometimes in not putting that money to work because it's losing value.

Darin: That's a hard one. A lot of people can't get their head around that one. That look, if I put a hundred grand in the bank account, and next year it's a hundred grand, I didn't lose any money. But you lost purchasing value based on inflation.

Julius: Absolutely.

Darin: So talk about, what are the alternatives for these people in investing in real estate passively?

Julius: For passive investments, and this is how I started, just to really get my feet wet. I was like, okay, I'm going to put $50,000 in a syndication, put it with someone that I trust to do it, and how did I get to trust them?

The Life Purpose of Taking Multifamily to Healthcare Community

Julius: Because I saw their track record of buying these real estate properties, generating income for them and their investors. And them sending out distributions to them and the investors participating on the upside when the properties are sold. So when I realized that I was like, okay, I'm going to try this too. So put in that investment, and guess what? I started to get my distributions. And I was like, oh, this is quite fantastic, I'm getting monthly distributions, my money is working for me, and I'm not really having to actively do anything at all. So I was like, this is great.

Then they talk about the cost segregation and tax benefits of it. All of a sudden out of that $50,000 I have about $35,000 in depreciation, paper losses. The property is appreciating, but I'm getting paper losses that I can apply to any passive income that I have. Including the distributions coming from that particular property. So my mind was blown, and I quickly realized when I started to go to all the conferences I didn't see healthcare professionals there. I saw a lot of MBAs and business folks and engineers and accountants. People from all facets of life, but healthcare professionals were very glaringly absent.

Also, I didn't see a lot of people that looked like me. There weren't very great underrepresented minority representation in the conferences that I went to. So at that point, I knew there was an opportunity here to take the gospel of multifamily and take it to the folks in the healthcare community.

Investment Alternatives

Julis: Say, listen, you do not just have to be limited to playing in the stock market. You do not have to be limited to playing in single family real estate. Particularly if you're too busy of a professional you can't do that. You don't have to just focus on that alone. There's an alternative asset class. There's an opportunity for you to also invest in some of these apartments that you drive by, lived in the past, that your children currently live in. You also could be potentially co-owners or joint owners of these properties. You could do it passively without necessarily actively doing any work, you're just putting your money to work for you.

That message has resonated with our community. That's the only reason that our company, the XSite Capital has experienced the type of growth we have in the past two and a half years. I mean, in two and a half years we've acquired assets under management of about 125 million. We have another property under contract right now. We literally started from just three people coming together and saying, you know what? We're going to take this word out to people in our community. One of my other partners is Leslie Awasom, who is a CRNA, certified registered nurse and anesthetist. We actually met in the operating room, he was putting my patients to sleep.

Darin: Did you really?

Multifamily Sounds Complicated

Julius: Yes, he was pointing my patients to sleep, I was operating on them. At the end of the day when surgeries are done we just talk business a little bit. And he was the one who introduced me to multifamily. Initially I brushed it off like it sounded too complicated. I mean, how do you go after $20 million deals and $17 million deals? It just sounds impossible.

Then when I started reading more and we started talking more I was like, oh my God, this is possible. We can actually collate our resources, we could pool resources together. Yes, I alone may not be able to take down a $20 million deal. But I can get a bunch of people in my community, in my professional community, in my daily community, my immigrant community, my underrepresented minority communities, and pull them together. Then say, "Let's go out, let's pool our money, our resources together, and go purchase these properties."

Guess what? That's what we did. And we've had incredible success doing it, and continue to, and the message is resonating, and people are believing in the vision and joining us on this journey, and I cannot be more thankful for it.

Darin: That's fantastic. I'm so glad that you've had that experience. Look, I got involved probably about four years ago, and it was very similar. I was skeptical and I was scared, and all those things, and I went out first. You did single family for a while.

I bought one duplex, and I was scared to do that duplex. Then afterwards I went searching for a way to go bigger. I found syndications, and I was scared getting in as a passive on my first syndication.

Jumping Into Your Life Purpose Is Scary at First

Darin: But here's what I want listeners to know. This has happened to you, I could tell, is that what you started out, it was about growing your wealth. And look, you still want that as part of your goal, to build legacy wealth. But now you're bringing it to your community, and you're expanding and you're teaching other people, both within the medical field and within your network of people. That's what I would say to listeners.

Look, it's scary. You want to do due diligence and get to know the people you're doing business with. But at the end of the day, anytime you do something new it's going to be a little scary. There's going to be a little bit of a leap of faith. But after you see the results then it's like, if you knew the cure to cancer, you're going to tell people about it.

Julius: Absolutely. You just don't want to keep it to yourself, only selfish people will. Because for me, particularly, I'm an academic surgeon. I teach residents, I teach medical students, fellows, and things of that nature. My identity for a long time was embedded in being an orthopedic surgeon. It was really difficult for me to start identifying as something additional to that, a real estate investor. And it was also extremely difficult for me to actually share about what I was doing with other people. Because I was like, wait, if I start talking to them about real estate are they going to take me seriously anymore?

Darin: Take you seriously as a doctor.

Don’t Hide a Great Opportunity

Julius: As a doctor, exactly, are they going to think that I'm maybe not serious about my craft as an orthopedic surgeon. So you go through those mindset challenges. What helped me get over that was the fact that I was like, listen, if I do not share this with them, then I am literally hiding a great opportunity from them to expand their minds and hopefully grow their wealth. So if it's worked for me, why shouldn't I share it with other people?

Let's be frank, I actually don't share it at work because things are very structured in my workplace. So I don't ever talk about real estate while I'm at work. But people, they see what I'm doing on the outside. So people actually reach out to me, just randomly, either from my workplace or from other places. And now the word is just out there, and when people want to hear about real estate and growing their wealth through real estate and how to go about it, they reach out to me. I'm just more than happy to share those things that I've learned with anyone who is interested.

Darin: That's huge. I mean, look, our health is paramount. You need to have fantastic health, but your finances are also an important part of your life. And some people may neglect either their health or their wealth. I love what you said about hiding a great opportunity. I have never heard anybody say it like that, but it is so true.

Life Purpose Fulfilled in Parallel Worlds

Darin: Because there's mentors out there, there's gurus out there, there's so many podcasts, there's books, there's blogs, there's all this social media. So some people can become cynical, like all these people are just out there just to make money. But look, a lot of people are out there to try to help other people achieve the same things that they've achieved, and that's admirable.

Julius: That's absolutely true. The way I see it is with my day job I help people restore their physical mobility. Now with real estate, I help people restore their financial mobility. So there's a lot of parallels in the two worlds. That's why I'm just as passionate about real estate and growing wealth as I am about replacing people's hips and knees.

If you were to come into my operating room, you would understand what I'm saying. Because I incredibly love what I do, and the proof is in the pudding.

The outcomes of my patients prove that I'm doing the right thing. My philosophy of practice is to treat my patients like I will treat my family member or myself. That's the same way that I've just transferred a lot of those same nuggets to real estate. So to treat my investors, or people that are coming along with me on this journey, just the same way I would treat my family members or myself.

We as a group, myself, Leslie Awasom, Tenny Tolofari, both my two partners, we just share those same core values, and that's what drives us forward. That's what determines what decisions we make when it comes to managing the properties, when it comes to dealing with investors, and things of that nature.

Syndicator’s Purpose: Making the Investor Experience Better

Julius: As far as we've stayed in that lane and just been investor focused, and always thinking about how can we make the experience of the investor better? How can we improve their education? How can we expand their minds, and how can we help them ultimately grow their wealth in a significant fashion? We've just grown amazingly. We thought that we were just going to start just with the education. But quickly that segued right into actual investments. Now we are on the fifth property, and I can't believe in myself sometimes.

Darin: It's huge. Look, before when you were saying in the beginning, you said when you're in the operating room and you're focused on hips and knees, that you're in your happy place. Immediately I thought to myself, well, if I had a problem with my hips and knees, I want a guy like that. He loves what he's doing, and the outcomes are great.

So to take that same philosophy into real estate is fantastic. You said something else that I want to expand on a little bit, you said the experience of the investor. So look, I've been in the business for the last four years, and I feel the same way as you in terms of investors and making sure I do everything possible. But I think of it in terms of the return. So I'm a business guy. I think of it in terms of, I want to maximize the returns for investors and do everything in my power to achieve that. But when you said the experience of the investor, I felt like there was more to it than just maximizing the returns. So I want your definition of that.

A KPI in Fulfilling Life Purpose

Julius: That is great. I definitely meant more than the returns. Because yes, especially nowadays, everybody's definitely going to promise great returns. Certainly some are going to deliver great returns. But what really separates, at least what I would love to separate us from the pack is that we care so much about our investors that they're almost like an extended family to us. And for us, our avatar, people that don't know much about multifamily real estate, so they need quite a bit of hand holding. They need quite a bit of education, they need quite a bit of TLC, so to speak, if you will.

So we pride ourselves in our efforts to really approach them with care. Approach them in a way where we just tell them, "Listen, we just want you to know about this, now your decision to invest is yours. You don't necessarily have to invest with us, and guess what? One of our core values is the spirit of abundance." So we actually don't care if they go invest with the next guy, who they think is more experienced, and things like that. We are still very happy if we were the ones who planted the seed. We still considered that a win.

So we actually track the number of people that we've educated to because that is a KPI for us. So for us, if we're able to plant the seed in you, and you end up getting educated, and you then go and invest with a Darin, with someone else, fantastic.

Investors Stay With Syndicators Living Their Life Purpose

Julius: We have done our job there. But guess what we found? We found that by using that same approach, people just want to stay with us. People actually are now bringing other people and saying, "Listen, I've got this great group of guys, they just want to educate." We have a free underwriting class, for example, every Tuesday night at 8:00 PM. People just come in, learn, leave, send other people in, leave, and come sometimes just to underwrite their own deals, things of that nature. It's great.

We have a monthly meetup every first Monday of the month where we bring industry experts to share everything on different real estate topics. Sometimes personal development topics, and people come in, enjoy that and we're not asking them for anything. We're not asking anyone to invest throughout all of this.

But obviously when people are learning from you, and you're exposing them to a completely different asset class that they did not actually think was possible for them to invest in before, then you start to become their thought leader. You start to become the person that they know, like, and trust, and they are willing to eventually invest with, and it's just happened for us.

And also, my partners and I have all been successful professionals before we even came together to start this business. So I was an orthopedic surgeon, my other partner is a cybersecurity professional, and the third one is the CRNA, a registered nursing anesthetist.

A Vessel of Life Purpose

Julius: We've all, in our respective worlds, built up a lot of goodwill and a lot of integrity and a lot of good relationships with people over time. So those helped us in those first couple of deals in the sense that people knew who we were. They knew we weren't going to put all their hard-earned money at risk, at least not knowingly. So they trusted us to go ahead and pool those resources together and go ahead and invest in those first couple of investments, and guess what? Those guys are super happy right now.

Because we have some people that we call our Xsite unicorns. Those are the people that have invested in every single deal with us, and there's a ton of them. We have about a 67% reinvestment rate from deal to deal. But those guys, the first time they gave us maybe 50k, which was the minimum. And then by the second deal it's 100, 150, and by the most recent deal, we're getting $500,000 checks from people.

Darin: That's crazy.

Julius: And sometimes I can't believe it myself because I'm like, wow. We co-invest with all our investors also, no questions about it, because we have to have skin in the game. That's just part of one of our goals with every single deal. But I'm just so amazed at the response of the people. They feel like, "Man, you guys are opening our worlds up to a completely different asset class that we had no access to." That's just been a blessing, to be a vessel in that way.

The Returns in Multifamily Investing

Darin: That's huge. So talk about some of the returns. In the stock market, maybe your average is 7-8% annualized over a long period of time in the stock market. What type of returns have you been seeing on the real estate side?

Julius: Absolutely. The returns are certainly over 15% average annual returns, to 25% on average. When you hit home runs, I've seen some sponsors end up with 40% average annual, 60% average annual. Obviously, those are great home runs, especially in the last three years or so we've seen a lot of those.

But I would say conservatively, even in this environment of rising interest rates, of increasing inflation, of ultra competition to get these deals. Because the cap rates are still somewhat compressed. At least the sellers are still not willing to sell at cheaper prices. There's still significant competition for deals. But even in this environment, where the stock market is yo-yoing back and forth and being pretty volatile, where some of their other asset classes are not doing as well, where crypto has completely gone downhill, real estate continues to be a solid investment. Particularly multifamily real estate.

I mean, where else are you going to get, for example, we're in the process of disposing of a property, and when we close that deal, our investors at that point would make about, I think, between 36 to 40% average annual returns.

Darin: That's crazy.

Julius: We promised them 19%. And so I'm okay with just underpromising and over-delivering, and guess what? There may be some properties where we get humbled. Where we may just maybe hit it or maybe come below promised returns, I completely realize that.

Above Average Returns

Julius: Without risk, there will be no return. There's definitely some risk, but the risks associated with multifamily real estate is below average for sure. The returns are above average for sure, no questions about it, and our first goal is capital preservation.

Our goal, first of all, is just to make sure that your principal is preserved. So that at the least we're doing better than your savings account or your checking account. And then the next goal is to hit the return that we promised you. But really our actual goal is to surpass that return by a mile.

Darin: Absolutely.

Julius: And so far so good. But I am humble enough to realize that, you know what, we may not get it right every single time, and I'm willing to live with that fact. But I am willing to bet that we will get it right 99% of the time, or 90 something percent of the time.

Darin: I'm invested in a lot of multifamily deals. I've had similar returns. I'm a believer that these returns are realistic and they are happening. People that are listening that maybe have not invested can think, oh man, that's pie in the sky stuff. Why do you think, and I have an answer here, but I want to hear yours, do you think the major reason for the fact that on multifamily properties you can actually achieve these types of returns.

Julius: The answer to that question is multifactorial, obviously. One is the fact that the demand-supply dynamics just supports multifamily at this point.

Demand-Supply Dynamics

Julius: They saw a shortfall of almost 4 million apartments in the US. So if development is not catching up to that, and we are not building enough to keep up to house the population that we have, it only makes sense that the demand-supply dynamics can favor folks investing in that particular asset class, and that's bottom line. The other is the fact that inflation in the last couple of years is tracked up significantly.

As inflation goes up, rent goes up, and that's usually the major revenue source in this component of revenues in these properties.

Also, sponsors and owner-operators are now listening to tenants in those properties and coming up with value add strategies that tenants are willing to pay for also. When you add dog parks, when you make the pool area look really nice, when you update the club area to have a nice yoga studio and a spin studio, when you create a little bus stop for the kids to wait in on their way to school so that when it rains or snow falls they're not waiting in the rain or the snow. When you pull bike racks up, all of these things that we do to make the lives of the tenants easier, and to just make things a little more seamless for them.

People will be willing to pay maybe an extra $10, $20, $30, $50 for. But we know what that translates to in the value of the property depending on what the cap rate of the market is.

The Power of Leverage

Julius: So that's the thing. What appears to be small gains in the property, or small gains in the net operating income, translates to massive increases in value, and that's one of the reasons also.

Darin: A lot of those are fantastic points. Points that I knew of, but I really didn't put hand in hand with those returns. But it's so true, demand-supply dynamics, the shortage of apartments, and homes for that matter, in the US. Then the ability to force appreciation by implementing some kind value add strategy.

Where I was going to go with it was leverage. Leverage, it's different in these multifamily deals than buying stocks. If you go buy Amazon stock, to double your money the stock price has to double, you don't have any leverage.

Julius: That's true.

Darin: But in a multifamily property, you're getting a loan anywhere from low leverage 60%, in the heyday 80%. People aren't getting typically 80% today. So you have that leverage. So you're buying a $20 million deal, but if three-quarters of it is financed with a loan, you don't have to double the value of the property. You just have to double the value of the equity that was put in.

Julius: Yes.

Darin: So a 20 million property, say it was $2 million of CapEx, so you're 22 million in it. You got to end up bringing in another $7 million. So $29 million you've doubled everybody's money, you don't have to sell it for 40 million.

Julius: Absolutely.

Another Checkbox

Darin: I come from a loan trading background. One of the safety factors for me too, is, okay look, we're going to underwrite the deal. The sponsors are putting up hard money that they're putting at risk. If the deal's not good, we can't attract the funds, they're going to lose that money. Then it has to go to the lender. So let's say it's agency financing, well agencies, Fannie and Freddie have been doing these loans all across the country for years. They have so much data. So if they approve the loan where you are underwriting the loan, that's just to me another checkbox. They are not in the business of losing loans.

Julius: You're absolutely right. That was one of the things that made complete sense to me. Because I was like, there are so many stops and so many checks because we are underwriting multiple times. The bank is underwriting, or Fannie is underwriting multiple times. Very often the real estate broker, who is brokering the sale of the property has underwrote it too using their own terms and their own assumptions.

So multiple people have underwrote this to come up with their valuation. Usually for us we would just not underwrite it, we'll also send it to a third party underwriter to just double check it. To make sure that the assumptions are completely correct. Then after that, we then stress test the deal to make sure that okay, there are multiple ways that we can cover up for any type of surprises that come up in the deal.

The Biggest Risk in Multifamily Investing

Julius: So it gives me so much comfort when I know that we've gone through all of those checks before going to the investors. I mean, to get one deal we usually have evaluated over 100 deals. We've put in LOIs in at least 30 of them. And we've been best and final on at least seven, and then we eventually get one. So you whittle everything down to the one that really works, so it makes sense.

Darin: Absolutely. So your investors come to you and they say, "Julius, what's the biggest risk in investing in multifamily, or investing in this deal?" What's your response?

Julius: So I would say one, the biggest risk is the fact that it's a relatively illiquid investment. You just cannot come to me six months later and say, "Hey, that money I gave you six months ago, I want it back." Even though we've gotten that too, and we've found ways to bring in others. Because of the demand for these investments we just replaced those people with the folks and got them out of the deal. But for the most part, when you're investing in these deals, you investing with the expectations that you're going to wait it out for the entire business plan.

Darin: The business plan is typically how long?

Julius: About three to seven years.

Darin: So when you're investing in these deals, that is one of the big differences between real estate and the stock market. You could sell the stock at any point in time. But you're in the deal for three to seven years.

Julius: You're in it. I mean, you're making money while you're in it, but you're in it.

There Are Things We Can’t Control

Julius: Yes, but the other risk is obviously there are some things that we can control. We can control the way we manage the property, we can get insurance on the property. For example, one of our first properties, we had a fire within a month of it. But guess what? We had insurance and that was covered. We actually got enough money to renovate that property, and that particular unit, and other units also, because of the insurance that was paid on it. So there are ways that we can mitigate those types of risks with regards to the property, and that is our responsibility. But there's also the external factors, the market, what the economy is doing in general with regards to real estate.

But when you actually look at the history, when you actually look at when this country took big hits, like for example in 2008. Was there some hit to the returns for multifamily? Yes, but very quickly those bounced back. When you actually tracked out multifamily did around that time, it was one of the better performing properties compared to what stocks did, compared to single family, the complete crash of the single family housing market. Multifamily and commercial real estate in some ways still kept their value through all of that.

So it makes complete sense to me, I'm a believer just like you, complete believer. And so for me, yes, there are risks, and obviously if you do invest in a market that is not growing, where employers are exiting, where there is no diversity of employers, where you're just dependent on one employer that essentially is responsible for 70% of your tenants in that particular property, yes, you could be rolling some significantly risky dices there.

Mitigate Risks That Could Stop You From Fulfilling Your Life Purpose

Julius: Because obviously if something happens to that employer and you lose 70% of your tenants, that goes from a stabilized property to a super distressed property. But the ways to mitigate against these risks are to make sure to go into growing markets where there's increasing population growth. There's increasing median household income growth, there's a diversity of employers, there's desirable attractions in the area that people want to be part of, you mitigate those risks with that.

But still, if the entire country's real estate and economy completely crashes, at that point I guess we'll probably all be in our homes and not doing much anyways. Because I think this would be the last of the asset classes to go, if that was the happening. I don't foresee that happening. I can only make decisions based on what information I have available to me, and based on the historical precedent of this asset class. It's a fantastic option, and it's definitely got to be part of the portfolio of any serious investor.

Darin: I agree. And I don't know if you owned property through COVID, but I did.

Julius: Yes, I did.

Darin: And when it first happened everybody was so scared that nobody was going to pay their rent, and you were going to still be responsible for the mortgage. What I found was our delinquency definitely went up during COVID. But we were cashflow positive every month.

How COVID Affected Multifamily Investors

Darin: It became apparent to me that look, that was something that we could never have planned for. You own an apartment complex and then all of a sudden COVID happens. The government says you can't evict people for nonpayment of rent. So you're like, holy cow, what am I going to do?

But people, for the most part, there were people that tried to take advantage of the system or were legitimately sick. But there were people that just paid their rent. They buy food, they pay their rent, and I was amazed how it performed in an environment that you couldn't even fathom happening. Where the government says you cannot, even though you're in a landlord-friendly state, you're not allowed to evict for nonpayment of rent.

Julius: We were one of the crazy people that went in just right at the beginning of COVID.

Darin: You did well then, right? I mean, because a lot of people were scared to get in there.

Julius: Yes, people were running out of the fire then we were running into the fire to see what was in there. And guess what? We found some beautiful diamonds.

Darin: Good for you. Hey, so one of the other risks that I think of is, and I want to get your take on this. It probably comes from my background in trading loans, is the financing.

Julius: Definitely.

Go For Fixed Long-Term Debt

Darin: So on a single family home most people are accustomed to getting a 30-year fixed-rate mortgage. Maybe if they're in a good financial position they trade it out for a 15-year for a lower rate. But in the multifamily world you can't get a 30-year fixed rate mortgage. The longest term you can get is a 10 or 12-year. So every loan has a balloon feature. Over the last two or three years a lot of loans were bridge loans with a three one- one type of structure.

Julius: Some of them without a cap.

Darin: Yes. Some are floating with no cap, some are floating with a cap, but I think that's a risk. I saw in my other business, in 2008, when things shift, lending environment shuts off. You don't want to own a property, I think, and be forced to have to either sell or refinance in a terrible economy.

Julius: That's true.

Darin: So what's your take on the financing piece?

Julius: I couldn't agree with you more. I think the way to mitigate that, and consistent with what I was saying earlier, that we try our best to mitigate best risks is to always try your best to go for fixed long-term debt if you can. If you're going to go the bridge route to at least purchase a cap that still works regardless. For me, I just feel like even though those fixed debt don't go more than 10 to 12 years, but most cycles, most real estate cycles don't last that long either.

You Have to Weather the Storm to Achieve Your Life Purpose

Julius: So if you are able to weather the storm.

Darin: I'm with you, I think five to seven years, if you can get in that five to seven-year range, but three years seems too short to me.

Julius: Yes, three years is short.

Darin: But a lot of syndicators shifted to that and was okay with that. Because they had other properties that had 10-year debt on them, and then all of a sudden interest rates dropped. Now the prepayment penalty was so high, that even though valuation-wise they could sell the property at a huge gain. Such a big portion of their gain was going to the prepayment penalty that they felt like they were stuck. So they said, I don't want to do that again, so they started doing shorter-term adjustable type loans.

Julius: Well, the opposite happened to us. Because we got the property at a pretty nice interest rate, and then the interest rates started going up, so the yield maintenance, obviously.

Darin: Yes, you got in at the right time where the opposite effect is happening. So good for you, and good for all of your investors. So we talked about passive, but look, you're going to get into this and is it easy?

Julius: No it's not. I mean, if you decide that the active life is for you, then I think you just have to understand this is a team sport. It's a team sport, and any team sport has a lot to do with relationships.

The People You Need for Your Life Purpose

Julius: It's a relationship sport too. You got to develop a lot of relationships with brokers, with accountants, with lawyers, with potential sellers, with other prospective buyers. When you eventually stop acquiring properties and you want to sell. So it's a relationship business, you have to also be willing to very clearly articulate what you are presenting to your investors on the investor side. I do think that you need a good operations person just to make sure that the day-to-day of the company is going well, and that's who Leslie Awasom, our co-founder is to me, to us.

Then you need a good acquisitions person. Someone who is pounding the pavement with the brokers, who is consistently reviewing deals, and has a good system for deal flow. Obviously part of that is the underwriting team, and things of that nature so you got to be able to find the deals. You got to be able to funnel them and figure out if they match your criteria or not. For those ones that match your criteria, you got to be able to underwrite them efficiently and get feedback back to the brokers as quickly as possible.

I think most importantly the first part of this should be education for you, educate. For us, another thing that we did was to pair up with a more experienced sponsor and just be a co-general partner on one of their deals. That was our first deal.

Darin: I think that's huge, be a passive investor first so you understand it. Then your first active deal, if you want to get active, partner with somebody that has a lot of experience.

The Importance of Team to Your Life Purpose

Julius: Because then you get to see what goes on behind the closed curtain. You get to see how the asset management goes. How the deals are broken down between sourcing and asset management and equity raise and key principle, and EMD, and things of that nature. So you get to see all the different facets of the business. You get to also start to discover where your strengths are, whoever the partners in that business are. Don't be scared to get partners.

For me, because I'm still a full-time total joint replacement surgeon. I'm only able to do what I do because I have fantastic partners and a fantastic team. Now we've grown to a team of about eight people and it's incredible what you are able to do when you have a group of people just focusing in the same direction, and being very clear eyed on what our vision and our focus is.

Darin: That's huge.

Julius: Yes. So I would say create your systems pretty early on. What we did was we created what our goals were. Then we reversed engineered what we needed to be doing on a weekly, daily, monthly, quarterly basis. We also adapted the EOS, the entrepreneurial operating system, and we run our meetings really efficiently. One person is responsible for one thing, and everybody keeps each other accountable. So that has really been the secret to our success. I think what I would advise for others who are interested in going active is to adopt.

Darin: That's fantastic. So you talked about goals, what is your next big stretch goal, man? You got 694 units, you've jumped into the fire when everybody was running away. So what's the next thing stretch goal?

Buy Your Time Back to Fulfill Your Life Purpose

Julius: So we want to get to a billion in asset under management.

Darin: To a billion?

Julius: Yes, to a billion in asset under management. Ultimately our goal XSite Capital is 5 billion by 2027, and we think we can do it

Darin: 5 billion by 2027.

Julius: Yes.

Darin: That's awesome. I love when I talk to people and they have huge goals. Look, you already did so much, but in two and a half years you've got 125 million, you're 694 units. But now your mind is on 5 billion in assets under management by 2027, that's huge. Think about all the people that you're helping. You're helping all those investors, you're helping all the tenets in those properties, that's huge. What do you like to do outside of work for fun my man?

Julius: I love spending time with family. I have two daughters, young daughters, a 24-month-old, and an eight-month-old, I love my wife. She's incredible and so supportive. So I usually really love to spend time with them and I love music, I love to listen to music. I dabble in playing them occasionally, playing the piano, a little bit of guitar, drums, certainly.

One of my biggest life's vision is also to increase access to musculoskeletal care in lower to middle-income countries, starting with Nigeria, where I was born and raised. So a lot of my work has been focused on trying to do that, and one of the motivations actually for going into multifamily was to buy some of my time and freedom back to be able to do more of that work.

Julius Oni’s Inspiration in Reaching His Life Purpose

Julius: So I was just in Nigeria in March doing some free hips and knee replacements for people who can’t afford them, and guess what? XSite Capital was able to be a major sponsor for that trip. So my world is finally starting to come together. Life just adds so much more purpose, and I'm just living full out. This is one of the things that real estate has been able to help me do.

Darin: That's fantastic. Most people, you did talk about the assets under management, most people talk about how much they want to grow. But the fact that you want to go back to your country of heritage and give back in a way to people that can't afford it, and that part of the wealth that you're going to be generating over the years is going to go back to that, that's huge.

Julius: Absolutely. And not just giving it back to people who can't afford it. But really creating systems to allow people, to allow the surgeons to have the technical know-how, the education, the skills, and the resources to be able to actually do the surgery, so offer the surgeries to the people on ground.

So the reason why I went into joint replacement in the first place was the fact that my paternal grandmother had end-stage arthritis of both knees. She was pretty debilitated in the last three years of her life. There was no one there to do a knee replacement at that time. So that inspired me to learn how to do the surgeries.

Life Has Much More Purpose

Julius: Unfortunately she died before I became a surgeon. But now I get to replace other people's uncles, aunties, fathers, mothers, friends, and family members' knees and hips. That gives me so much joy. But one thing I still know is that the access to this elective surgeries is still very unattainable in that part of the world. So if I'm fortunate enough to have that much resources to be able to do it on even a larger scale than I'm doing it right now. That would make life worth it, for sure.

Darin: I mean, life has much more purpose, you say. That's awesome. Hey, so if people want to get to know you, your company more, what's the best way for them to do that?

Julius: JuliusOni@XSiteCapital.com. You could go to XSiteCapital.com, we have a website. You could sign up to get our newsletter, so join our investor club. That's another way to join the XSite family. Let's continue to grow our minds and grow our wealth together.

Darin: That's fantastic. This guy is a very sharp guy, and unless you're watching it on YouTube, if you're listening to it you can't see. But when I met him, this guy is a sharp dresser too. This guy is smooth. So in any event, I hope you check out his website, Julius, appreciate you coming on the show, listeners, I hope you enjoyed that one.

Julius: Thank you so much, Darin, for the opportunity. You are a very sharp dresser yourself, I really appreciate that shirt. But thank you so much, we really appreciate the opportunity, and hopefully, we can do some deals together soon.

Darin: Absolutely, I'm game for that. So listeners, until next week, signing off.

How to Reach Julius Oni

• Website